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Bill would make state investigations into wage theft a public record

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COLORADO – A Rocky Mountain PBS News investigation has prompted proposed state legislation to improve transparency of information concerning employers’ wage violations.

House Bill 16-1347 would turn previously secret records on whether an employer had violated wage laws into public records. That means that the public would have access to such information as cases of employers who were found to have illegally withheld pay or underpaid their employees.

Rocky Mountain PBS News showed how some employers have made cheating workers a way of business and how state labor authorities and outdated laws have shielded the actions of bad actors from public view.

The existing 100-year-old law has been interpreted as requiring the investigative process to be kept secret, even when issues are resolved. Federal labor investigations, meanwhile, have an easily accessible mobile app.

House Bill 16-1347 makes one caveat: the state Department of Labor and Employment is prohibited from releasing trade secrets, which are deemed confidential. When someone requests information on wage violations, the bill mandates that the department must notify the employer, who then has ten days to respond with further information to show if a trade secret is at issue.

You can read the full text of the proposed legislation here.

Source: Rocky Mountain PBS News

Senator Brown proposes anti-wage theft legislation

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CINCINNATI, OH – In the wake of Cincinnati becoming the first Ohio city to pass a wage theft ordinance, one of Ohio’s senators is trying to bring the momentum nationwide.

U.S. Sen. Sherrod Brown introduced the Wage Theft Prevention and Wage Recovery Act Wednesday. The legislation would give workers the right to receive full compensation for all of the work they perform, as well as the right to receive regular paystubs and final paychecks in a timely manner.

It would also provide workers with tools to recover stolen wages and make assistance available to enhance the enforcement of and compliance with wage and hour laws.

The bill was co-sponsored by U.S. Sen. Patty Murray, D-Wash.; U.S. Rep. Rosa DeLauro, D-Conn., introduced companion legislation in the House of Representatives.

Wage theft occurs when employers refuse to pay workers money that they are owed by withholding pay, tips or overtime.

“When bosses don’t pay their workers what they’re owed, it robs them of money they earned for their hard work and hurts businesses that play by the rules,” Brown said in a news release.

“We must create a system where employers who steal wages are held accountable and workers have the tools they need to recover their wages when they’ve been cheated.”

A 2009 study by the National Employment Law Project (NELP) of nearly 4,500 low-wage workers found that more than 60 percent had been shorted by their employer each week, equivalent to $2,634 per year in unpaid wages. Analysts applying this study to Cincinnati estimate that low-wage workers here lose $52 million per year to wage theft.

Low-wage and immigrant workers are victims of wage theft when they are paid less than the minimum wage, are shorted hours, forced to work off the clock, are not paid overtime or not paid at all. These are pervasive practices across many industries.

Despite complaints about wage theft, Ohio has cut the number of state wage investigators from 15 to five since 2008.  The closest investigator to Hamilton County is located in Dayton, Ohio.

In early February, Cincinnati became the first city in Ohio to pass an ordinance to improve enforcement of existing wage laws.

City Council voted 7-2 for the ordinance. Under the measure, if the city or another agency determines a company has committed wage theft, city officials would be able to have the money returned and the company would be barred from doing business with the city.

During a news conference call Wednesday, Brown was joined by Brennan Grayson, director of the Interfaith Workers Center in Cincinnati, who helped organize support for Cincinnati’s recently-passed wage theft ordinance.

“Sen. Brown’s bill is the type of change we need to begin making things right, to begin restoring dignity to wage earners,” Grayson said.

Under the Ohio Democrat’s proposal, workers would recoup the full compensation that employers have taken from them, create a civil penalty of $2,000 when employers violate minimum wage and overtime protections and  increase the time that employees have to bring a claim for owed wages.

The bill also would make it easier for employees to take collective action to recover their stolen wages and remove the current requirement that employees affirmatively “opt-in” to engage in a collective action under the Fair Labor Standards Act.

Last November, Brown introduced legislation to take action against employers that misclassify their workers to cheat them out of wages, benefits, and important workplace protections – one of the practices that contributes to wage theft. He has also introduced bills to raise the minimum wage, expand paid sick leave to all workers and support workers’ right to bargain with employers.

Source: Cincinnati.com

Tennessee contractors avoid workers’ comp to win bids

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NASHVILLE, Tenn. – The amount of growth in downtown Nashville requires a lot of labor, but not every worker is equally protected in case of injury.

The practice of winning low bids by avoiding workers’ compensation payments is called worker misclassification.

The Channel 4 I-Team has found the same thing uncovered nearly five years ago at the Music City Center is now happening right across the street.

WSMV Channel 4

In 2011, a drywall subcontractor with a large workforce was failing to deduct taxes of any kind or pay workers’ compensation or overtime.

Some contractors use worker misclassification to win competitive bids. They can undercut a rival by 20 percent or more by not paying into insurance pools.

“Everybody is hurt by employee misclassification, all of us,” said Scott Yarbrough with Workers Compensation Compliance. “If an employee is hurt, they don’t have a workers’ compensation policy to fall back on. The hospitals have to treat them as a charity case most of the time.”

When the I-Team investigated the Music City Center, the state had never audited a job site for compliance. They do now.

At an apartment complex in Bellevue, a subcontractor named Pablo Delgado was fined more than $87,000 for understating his payroll.

At another Bellevue complex, Aguilar Carpentry was caught misclassifying its workforce and was hit with almost $73,000 in fines.

Investigators also levied a $39,000 fine on a Vanderbilt dormitory project.

Government jobs aren’t immune. A Metro-funded project in north Nashville led to a $69,000 fine for a roofing subcontractor.

A worker at the new Westin Hotel across from the Music City Center spoke to the I-Team. He asked not to be identified.

“Yes, it’s very common. They’re still doing it,” the worker’s translator said.

The man showed us his paychecks with no tax deductions whatsoever. There was also no overtime pay, even though he works 50 hours a week.

The man said it’s done everywhere.

“He said that 95 percent of the jobs he has done, they don’t take taxes off the cash and they don’t pay time and a half overtime,” the translator said.

“It’s a huge risk for families,” Yarbrough said. “When an uninsured employee gets hurt, it starts an economic death spiral for them. They can’t pay their hospital bills. They lose their car, can’t get to work. They lose their job, lose your house.”

Many fines go unpaid. The offender has yet to pay a dime of the $87,000 fine mentioned early. Only $5,000 of the nearly $73,000 fine against Aguilar Carpentry has been collected. The subcontractor on the Vanderbilt dorm has paid less than half of what he owes. The roofer from the Metro-funded project has managed just $3,000 of the $69,000 he owes the state.

Offenders are given 24 months to pay.

“The main thing we want to see is people coming back into compliance,” Yarbrough said. “We don’t necessarily want to run them out of business. We want to give them an opportunity to pay over time.” The state just started cracking down on this in 2013.

Collections have increased from $85,000 statewide to $132,000 last year. As of Wednesday, there is still $325,000 owed by violators.

Experts said in the construction field alone, misclassification is shorting the state Medicare pool somewhere between $7 million and $42 million.

Source: WSMV News 4, Nashville, Tenn.

Manchester drywaller jailed for under-the-table payroll scheme

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MANCHESTER, N.H. – A city dry-wall contractor was sentenced to 18 months in federal prison and ordered to pay the Internal Revenue Service more than $780,000 for his role in an under-the-table payroll scheme.

Cruz E. Galvan, 39, who operated Four Star Drywall, was ordered to pay the IRS restitution totalling $786,553. Authorities said he had paid $100,000 of that amount several weeks before being sentenced Tuesday in U.S. District Court.

According to U.S. Attorney Emily Gray Rice, Galvan pleaded guilty to one count of federal employment tax evasion, admitting to a scheme to dodge payment of federal employment taxes on wages he paid to his employees.

During his plea hearing, Galvan admitted that from April 2010 until December 2012 he paid employees with vouchers instead of with checks. The employees were then instructed to present the vouchers to a local check-cashing business to which Galvan had previously provided funds with instructions to pay the vouchers in cash.

He acknowledged he did not report the wages he paid to the IRS, evading federal income tax withholding and Social Security, Medicare and federal unemployment taxes.

Immigration proceedings are underway to deport Galvan, who authorities say is in the country illegally, after he serves his sentence.

City police, the IRS, the U.S. Department of Homeland Security and the U.S. Department of Labor, Office of Inspector General, investigated the case, which was prosecuted by Assistant U.S. Attorney Bill Morse.

Source: Union Leader

USDOL Issues Guidance on Joint Employment

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One of the primary schemes of corrupt contractors is using subcontractors and labor brokers that pay employees off-the-books or as 1099 subcontractors to evade paying employment taxes, workers’ compensation premiums, overtime and wages. When faced with law enforcement, corrupt contractors use that subcontract relationship as a shield against accountability. But when looked at closely, the contractor often times acts like an employer of the workers just as much as the subcontractors or labor brokers. It is a growing trend and construction is not the only industry facing the problem.

In response, the US Department of Labor issued an Administrative Interpretation (AI) of joint employment under the Fair Labor Standards Act (FLSA). Joint employment under the FLSA makes the contractor and subcontractor or labor broker separately and jointly liable for unpaid wages and overtime if the contractor is also acting as an employer of the workforce. The AI does not change the law, it provided guidance on existing law and gives notice to employers that the USDOL will use joint-employment findings more often.

Dr. David Weil, Administrator of the USDOL Wage & Hour Divisions wrote, “As the workplace continues to fissure, and as the employment relationships continue to become more tenuous and murky, we will continue to identify where joint employment applies and hold all employers responsible.”

In a press release supporting the USDOL’s action, General President Doug McCarron said, “This action by the Labor Department lets cheating contractors know that they can’t continue to hide behind their labor broker subcontracts.”

Construction Co. Owners Face Racketeering Charges in Florida

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Gaetan Richard and Murray Rice were arrested this month on numerous charges, including racketeering, related to workers’ compensation fraud. According to state records, they have two active construction businesses: Richard and Rice Construction LLC and Richard & Rice Construction Co., Inc. Four other co-defendants were also arrested.

The alleged criminal scheme involved paying workers through over twenty shell companies. Over the course of about two years, Richard and Rice paid the shell companies nearly $40 million. According to an affidavit from the investigating detective, more that $12 million in workers’ compensation premiums and over $3 million in federal payroll taxes went unpaid.

If convicted, they could face 30 years in prison.

Avoid the perp, walk: workers’ comp. premium fraud

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“[A]s more workers’ comp fraud cases start creeping into the headlines, authorities are cracking down on the illegal practice, and construction companies need to be aware of their legal duties to avoid the potential consequences of fraud.”

“There are a few basic types of employer workers’ comp fraud, with diverse variations stemming from those few types.

“One instance of fraud involves paying employees cash off the books so that the amount of payroll on which premiums are calculated is reduced, thereby reducing premiums.”

“Along those same lines are cases when employers intentionally misclassify employees as independent contractors.”

“Yet another common scheme is using shell companies, or companies set up for the sole purpose of paying employees without paying workers’ comp insurance and other benefits or taxes. This can be a company that the employer sets up himself or a third party who poses as a single-man operation with minimal insurance and minimal paperwork — just enough to avoid raising questions during an insurance premium audit.”

“Perhaps the strongest enforcement assets are contractors themselves.

‘”When you get burned on a job, and you didn’t get the award because somebody’s doing it for a price you know they can’t, (other employers) just turn them in,” [Mark] Sierra [construction insurance expert and consultant] said. “Then the state has people that go out on job sites and inspect them. So, yes, the competition definitely helps police it.”

[William] Canak [professor, Middle Tennessee State University]  added, “At a national level over the last decade, there’s been much greater recognition that there are a lot of people breaking the rules and that it negatively affects the proper functioning of the marketplace for employers and employees. It harms the community, it harms the workers and it harms law-abiding employers. So we’re seeing these initiatives roll out, and that’s good. It can’t all happen at once, but we’re making a lot of progress.”’

Construction Dive, January 26, 2016

Engels on Transition Team

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Jon Bel Edwards was elected Governor of Louisiana. He appointed Executive Secretary-Treasurer Jason Engels to his economic development transition team. The team will make recommendations on job training and workforce development. Recently, Jason appeared on New Orleans News 8 in a three-part series exposing payroll fraud in the Louisiana construction industry.

Cash Pay Schemes Spreading

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Florida is not the only state seeing check cashers and contractors conspiring to pay workers off-the-books. A bar owner in the Bronx and a pawn shop owner in New Jersey were arrested after a Port Authority and Manhattan DA investigation into contractors underreporting payroll. Contractors’ workers were paid in cash to evade paying taxes and workers’ compensation premiums. The defendants are accused of cashing almost $17 million in checks for 19 businesses from 2012 to 2014.

According to court papers, a contractor brought a $149,250 check to the bar and received $141,787. The check was then brought to the pawn shop where it was deposited for $147,011 in cash which was brought back to the bar.

McCrory orders new effort to crack down on cheating businesses

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Gov. Pat McCrory of North Carolina signed an executive order directing state officials to find and penalize employers committing payroll fraud. The EO comes after a News & Observer series detailed the rampant problem and the failure of the legislature to pass anti-payroll fraud bills. Payroll fraud costs North Carolina and the federal government $467 million a year in lost revenue.

“When unethical employers improperly classify their employees as independent contractors, they not only put our state’s workforce at risk, but also put ethical businesses at a competitive disadvantage and rob taxpayers of significant revenues,” McCrory said.

Photo credit: The News & Observer
Source: The News & Observer